Ending a seven-year investment famine in India’s potentially explosive gas economy, Reliance Industries and its partner BP on Thursday pledged to infuse Rs 40,000 crore in the once-prolific deepwater gas fields of the Krishna-Godavari (KG) D6 block on the country’s east coast. The investments will be over the next three to five years. The renewed agreement between the two companies will also include exploring non-conventional energy sources such as advanced low-carbon fuels and renewable energy, apart from investing in downstream businesses, including retail fuel outlets.

Since 2011, when BP bought a 30% stake in some of RIL’s oil and gas production-sharing contracts, the capital-intensive gas fields in the KG-D6 block haven’t seen any major investments.

Addressing the media along with BP’s chief executive officer Bob Dudley, RIL chairman Mukesh Ambani said the proposed investments in the R-series gas fields in KG-D6, which have witnessed a steep fall in production over the last few years, would yield 30-35 million metric standard cubic metres per day of gas. The additional gas production would bring down the country’s dependence on imports by 10%, which is in line with the National Democratic Alliance government’s plans as well. Dudley said: “Changed (government) policies have allowed us to develop new resources.”

Since November 2014, gas prices have been partially linked to markets: The prices are capped as per a formula linked to spot market prices in select global hubs, and on a biannual basis, the prices are revised. Although the prices have only come down from the level fixed initially under the new regime to the current $2.48 per million British thermal unit for April-September 2017 period, Ambani said he was happy with the new pricing mechanism.

The Mumbai-based RIL is fighting four arbitration cases relating to the KG-D6 block, all involving the government or its arms (Directorate General of Hydrocarbons and ONGC). However, Ambani said the two companies don’t expect these affecting fresh investments. “We are sure we will get a fair outcome and it will not come in the way of our future investments,” he said. He clarified that despite being in arbitration case with state-run ONGC, both companies have an ongoing business and RIL is open for further business with the national oil company.

The new cooperation agreement will also explore trading of fuel and carbon emission trading. The collaboration will also address the mobility needs of urban, rural, industrial, and highway consumers in India, applying capabilities of both the companies. Ambani said the companies plan to deliver “higher value, low price” solutions to customers and India will be the first market to experience the outcome of the projects. “We will be working with universities across the world and various pilots will be done. We aspire to export this model to overseas customers as well,” said Ambani, adding that as and when concrete results emerge, it will be announced jointly by the two companies.

Kameswara Rao, partner, PwC, said: “It’s a business imperative for large energy companies to prepare themselves for a low-carbon economy, which means both reduced demand for their traditional products and market demand in other segments. Large energy companies, especially those with upstream interests, have a healthy risk appetite, capability and deep pockets to credibly invest and even reshape low-carbon technologies, such as, say, offshore wind.”

“India’s demand for both energy and mobility is growing and evolving rapidly. This presents many opportunities for BP and Reliance to build on our existing strong relationship in upstream and expand our partnership further downstream. Combining skills and experience from both our companies, we expect to cooperate on mobility and advanced low carbon solutions and jointly explore other opportunities throughout India’s energy sector,” said Dudley.

The joint partnership will also be exploring the retail fuel business in India. There are already 59,595 retail outlets across the country of which 56,000 are affiliated to oil marketing companies. RIL at present has 1,244 retails outlets. The announcement comes a day ahead of India moving towards dynamic retail fuel pricing.

RIL’s two refineries have a combined capacity of around 62 mtpa. As per the Petroleum Planning and Analysis Cell, in April RIL refined 5.8 mt of crude. Dudley said BP expects global oil prices at $50$55 per barrel by the next year.

RIL is locked in four arbitration cases with the government. It is in arbitration against the government disallowing recovery of certain KG-D6 gas field costs as punishment for gas output lagging targets. Another arbitration is over deferring of a natural gas price hike due to the company from April 1, 2014. The latest arbitration is against government demanding $1.55 billion compensation from RIL and its partners for “unfairly” producing ONGC’s gas.